Home-price bidding wars flare across many neighborhoods

Originally published August 2, 2014 at 9:00 am

Updated August 4, 2014 at 12:46 pm

Kathryn Singh and her husband, Dominik, recently won a bidding war for this house on Capitol Hill. Kathryn Singh, who had been a real-estate agent in Wisconsin, said, “It’s a whole other animal out here.”

From Seattle to Issaquah and Everett to Renton, many homebuyers have pulled out all the stops to win select digs among slim pickings.

And sellers did everything they could to stoke the bidding wars.

In Seattle’s Ravenna neighborhood, a renovated home on a large lot offered at $549,500 drew about 20 bids and sold in May for $687,000, or 25 percent over the list price. While that’s an extreme case, about two-thirds of Ravenna homes sold this spring went for above list price.

Across King and Snohomish counties, bidding wars are a major reason why almost 40 percent of homes sold from April to June went for more than their listed price.

In the second quarter, the Seattle metro’s housing market ranked sixth nationally for the share of homes sold above list, behind only five metros in and around the San Francisco Bay Area, according to data from Seattle-based real-estate brokerage Redfin.

“There is an intensity in Seattle that’s shared with other high-tech, high-growth cities,” said Nela Richardson, chief economist at Redfin.

While bidding wars aren’t the rule across the Seattle area, they are ubiquitous in certain neighborhoods and for well-located trophy properties, according to Redfin data and interviews with real-estate agents.

For instance, in Bellevue’s Mockingbird Hill neighborhood, a four-bedroom home near top-ranked Newport High School drew four bids and sold in June for $480,000, or $20,000 over list price. The inventory in this neighborhood is among the tightest: Only nine homes were for sale there in the second quarter, and the six that sold all went for above list price.

Even in Kenmore, traditionally an affordable middle-class haven, a remodeled three-bedroom rambler attracted seven offers and sold in June for $16,000 over the $419,000 list price. The winning bidder paid cash.

Bellevue, Issaquah, Newcastle and Kenmore were the only cities in the region where more than half the single-family homes that sold went for above list price; in Seattle, nearly half the homes sold did.

“What is so heartbreaking is that everyone’s got fabulous offers,” said Seattle real-estate broker Presha Sparling. “If there weren’t competing offers that weren’t even more fabulous, you’d want to accept all of these.”

Agents say the spring’s frenzied market and double-digit appreciation reminds them of the housing bubble years in 2006 and 2007.

“You have people making decisions under duress rather than being thoughtful about it,” said Erik Noyd, a real-estate broker at CB Bain in Redmond. “It’s no fun.”

Where it’s hot, not

Quantifying bidding wars is tricky because the Northwest Multiple Listing Service doesn’t track the share of homes sold that received multiple offers. Redfin finds 60 to 70 percent of offers its Seattle-area agents wrote in the spring had competition, but its agents are only a fraction of the market.

There was probably a bidding war on a home, brokers say, if it sold for more than list price by a significant margin, say 5 percent or higher, and the home went under contract in less than two weeks.

By that definition, about 30 neighborhoods — less than 10 percent of the ones tracked by Redfin — are undisputably hot: As a group, about three-quarters of the single-family homes that sold there last quarter fetched more than list price.

Half of those neighborhoods are in Seattle, with the biggest gap between sale price and list price in Sand Point in North Seattle and Seaview in West Seattle. The rest are in Bellevue and Redmond, with a few in Edmonds and Woodinville.

More broadly, in the top fifth of the region’s neighborhoods, half of the single-family homes that sold went under contract in less than a week, and at least half of homes that sold fetched more than list price, according to data from Redfin. Inventory is extremely tight in those neighborhoods.

At the other end of the spectrum, in about one-sixth of the region’s neighborhoods — most in South King County or Snohomish County — single-family homes aren’t being snapped up. In these areas, half of the homes sold spent more than a month on the market before going under contract.

The longest time on the market was in Buenna, on the north side of Federal Way — a median of five months — where the median home price was about $277,000. Median means half the homes were above, half were below.

Bidding wars aren’t the only reason for homes selling for above list price, said Trevor Smith, managing broker at Locality, a Seattle brokerage.

The seller and buyer may agree on a slightly higher purchase price in exchange for the seller covering some of the buyer’s closing costs, he said. The seller still gets the asking price, and the buyer doesn’t have to bring as much cash to closing.

Windermere broker Kim Witzig said buyers wary of bidding wars may want to steer clear of ramblers and homes with the master bedroom and utilities on the ground floor.

“There’s tremendous demand for ramblers because of baby boomers’ downsizing and wanting to move away from stairs,” he said. “A lot of the buyers pursuing those ramblers are more established financially. They often pay cash.”

Roller-coaster ride

Kathryn and Dominik Singh went through all the emotional ups and downs during bidding wars on two different houses this year.

They moved here two years ago from Madison, Wis., and decided at the beginning of this year it was time to buy a house.

After forking out money for a pre-inspection — a quick review by a licensed inspector before an offer — the couple put in the highest bid on a house in Kirkland. They waived the inspection contingency and offered the seller free rent for two weeks.

But then the home appraised below the sale price, and the Singhs, who hadn’t waived that contingency, backed out of the deal and got their earnest money back.

They kept looking and were negotiating with a builder on a new home in Renton when a three-bedroom house in Seattle’s Capitol Hill neighborhood came on the market. Their agent got them into the house the same evening that they saw the listing.

“There were multiple people looking at the same time,” Kathryn Singh recalled.

The Singhs went out of town that weekend. On Monday, the day the seller was reviewing all offers, their agent Sam Ward submitted the Singhs’ bid.

Their offer on the house, which was listed for $455,000, was the third highest — $500 lower than the second-highest bid.

Kathryn Singh got the news just past 8 p.m.: They had been outbid on the house.

Less than an hour later, Ward called again with a shocker: The top bidder had pulled out — and the seller passed over the second-highest bid in favor of the Singhs’ bid of $480,000.

Redfin listing agent Sabrina Booth said that once the top bidder pulled out, the seller chose the Singhs’ offer because: “They wrote a really nice letter, and they also had a local lender, which gave us confidence we’d be able to communicate with their lender and close on time.”

But the appraisal came in $14,000 below the agreed sale price. The seller and the Singhs agreed to split the difference. The Singhs came to closing with an additional $7,000.

“It was wild — I would have never imagined this,” said Kathryn Singh, who had been a real-estate agent in Wisconsin. “It’s a whole other animal out here.”

Time to cool it?

Some agents are changing strategy to avoid bidding wars completely.

Carlene Sandstrom, a Windermere broker in Yarrow Bay who sold the Mockingbird Hill house for $20,000 over list price, said she sensed fatigue in buyers and agents when she got ready in April to list a three-bedroom house in the same subdivision.

Instead of pricing the house 3 percent below what she thought it could fetch to entice bidding wars, she set a higher price. Nor did she set a deadline for reviewing offers.

“We’re not doing bidding wars,” she recalled telling other agents. “The agent who gets in here first and writes the best offer will get the house.”

She listed the house for just under $575,000. Three days later, a buyer from the Bay Area had the house under contract.

In June the house sold for $665,000 — or almost $90,000 over list price.

The way Sandstrom listed the house was “a refreshing move” for buyers sick of being played off each other, said Ryan Runge, a Renton broker for American Classic Homes, who represented the buyer.

Runge and other brokers say it’s likely that sellers will continue trying to stoke bidding wars — but they warn buyers may withdraw from the market.

“Buyers are tired of getting beat up,” said Barbara Shikiar, managing broker of Windermere’s Sand Point office. “They’re tired of spending $500 to $600 (on pre-inspections) and not having a house.”

For buyers in any price range who’ve lost out in a bidding war, Shikiar said the hardest part is the emotional energy people have invested.